Question 1

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands rises above the minimum of its average variable cost,but still lies below the minimum of average total cost,in the short run the firm will

Accepted Answer

A)   experience losses but will continue to produce rubber bands.
B)   shut down.
C)   earn both economic and accounting profits.
D)   raise the price of its product.E) None of the above
F) A) and C)

Question 2

When new firms enter a perfectly competitive market,

Accepted Answer

A)   economic profits of existing firms will continue to be zero.
B)   entering firms will earn zero economic profit upon entry into the market.
C)   existing firms may see their costs rise if more firms compete for limited resources.
D)   prices will rise as existing firms raise prices to keep new firms out of the market.E) B) and C)
F) C) and D)

Question 3

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Accepted Answer

A) True 
 B)False

Question 4

Figure 14-14  
-Refer to Figure 14-14.When the market is in long-run equilibrium at point A in panel (b) ,the firm represented in panel (a) will

Accepted Answer

A)   have a zero economic profit.
B)   have a negative accounting profit.
C)   exit the market.
D)   choose to increase production to increase profit.E) A) and D)
F) All of the above

Question 5

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit.The firm's fixed cost is $4,000 and its variable cost is $8,300.In the short run,should the firm continue to operate?

Accepted Answer

No,the firm should shut down,s...

Question 6

When firms are said to be price takers,it implies that if a firm raises its price,

Accepted Answer

A)   buyers will go elsewhere.
B)   buyers will pay the higher price in the short run.
C)   competitors will also raise their prices.
D)   firms in the industry will exercise market power.E) A) and B)
F) B) and C)

Question 7

Table 14-3
 
-Refer to Table 14-3.For a firm operating in a competitive market,the marginal revenue is

Accepted Answer

A)   $0.
B)   $7.
C)   $14.
D)   $21.E) B) and D)
F) B) and C)

Question 8

At the profit-maximizing level of output,

Accepted Answer

A)   marginal revenue equals average total cost.
B)   marginal revenue equals average variable cost.
C)   marginal revenue equals marginal cost.
D)   average revenue equals average total cost.E) C) and D)
F) A) and B)

Question 9

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day.If Winona's fixed costs unexpectedly increase and the market price remains constant,then the short run profit-maximizing level of output

Accepted Answer

A)   is less than 1,000 pounds.
B)   is still 1,000 pounds.
C)   is more than 1,000 pounds.
D)   becomes zero.E) None of the above
F) A) and D)

Question 10

Which of the following statements regarding a competitive market is not correct?

Accepted Answer

A)   There are many buyers and many sellers in the market.
B)   Firms can freely enter or exit the market.
C)   Price equals average revenue.
D)   Price exceeds marginal revenue.E) A) and D)
F) A) and C)

Question 11

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10.At the market price of $12.50 per unit,the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units.What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

Profit can be calculated as (P...

Question 12

The analysis of competitive firms sheds light on the decisions that lie behind the

Accepted Answer

A)   demand curve.
B)   supply curve.
C)   way firms make pricing decisions in the not-for-profit sector of the economy.
D)   way financial markets set interest rates.E) A) and C)
F) B) and C)

Question 13

When a profit-maximizing firm is earning profits,those profits can be identified by

Accepted Answer

A)   P *Q.
B)   (MC - AV
C)  * Q.
C)   (P - AT
C)  *Q.
D)   (P - AV
C)  * Q.E) B) and C)
F) A) and B)

Question 14

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements,we would expect that

Accepted Answer

A)   the demand for products in this industry would increase.
B)   the market price of products in this industry would decrease in the short run but not in the long run.
C)   the firms in the industry would make a long-run economic profit.
D)   competition would force producers to pass the lower production costs on to consumers in the long run.E) A) and B)
F) B) and C)

Question 15

In calculating accounting profit,accountants typically don't include

Accepted Answer

A)   long-run costs.
B)   sunk costs.
C)   explicit costs of production.
D)   opportunity costs that do not involve an outflow of money.E) None of the above
F) A) and D)

Question 16

The exit of existing firms from a competitive market will

Accepted Answer

A)   increase market supply and increase market price.
B)   increase market supply and decrease market price.
C)   decrease market supply and increase market price.
D)   decrease market supply and decrease market price.E) A) and B)
F) A) and C)

Question 17

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

Accepted Answer

A)   $9
B)   $10
C)   $11
D)   $12E) All of the above
F) A) and B)

Question 18

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6.Firms will shut down in the short run if the market price

Accepted Answer

A)   exceeds P3.
B)   is less than P1.
C)   is greater than P1 but less than P3.
D)   exceeds P2.E) B) and C)
F) A) and D)

Question 19

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Accepted Answer

A)   certain outlays of money by the firm.
B)   implicit costs.
C)   operating costs.
D)   fixed costs.E) A) and B)
F) B) and C)

Question 20

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A)   Profit = MR - MC
B)   Profit = MR - TC
C)   Profit = (P - M
C)  * Q
D)   Profit = (P - AT
C)  * QE) B) and C)
F) A) and B)

Exam 14: Firms in Competitive Markets

When firms are said to be price takers,it implies that if a firm raises its price,

Correct Answer
verified

When new firms enter a perfectly competitive market,

Correct Answer
verified

Figure 14-14 -Refer to Figure 14-14.When the market is in long-run equilibrium at point A in panel (b) ,the firm represented in panel (a) will

Correct Answer
verified

Which of the following could be used to calculate the profit for a firm?

Correct Answer
verified

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Correct Answer
verified

In calculating accounting profit,accountants typically don't include

Correct Answer
verified

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day.If Winona's fixed costs unexpectedly increase and the market price remains constant,then the short run profit-maximizing level of output

Correct Answer
verified

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Correct Answer
verified

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands rises above the minimum of its average variable cost,but still lies below the minimum of average total cost,in the short run the firm will

Correct Answer
verified

Correct Answer
verified
Profit can be calculated as (P...
View Answer

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements,we would expect that

Correct Answer
verified

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit.The firm's fixed cost is $4,000 and its variable cost is $8,300.In the short run,should the firm continue to operate?

Correct Answer
verified
No,the firm should shut down,s...
View Answer

At the profit-maximizing level of output,

Correct Answer
verified

The analysis of competitive firms sheds light on the decisions that lie behind the

Correct Answer
verified

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6.Firms will shut down in the short run if the market price

Correct Answer
verified

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

Correct Answer
verified

When a profit-maximizing firm is earning profits,those profits can be identified by

Correct Answer
verified

The exit of existing firms from a competitive market will

Correct Answer
verified

Which of the following statements regarding a competitive market is not correct?

Correct Answer
verified

Table 14-3 -Refer to Table 14-3.For a firm operating in a competitive market,the marginal revenue is

Correct Answer
verified

Exam 14: Firms in Competitive Markets

When firms are said to be price takers,it implies that if a firm raises its price,

Correct AnswerverifiedShow Answer

When new firms enter a perfectly competitive market,

Correct AnswerverifiedShow Answer

Figure 14-14 -Refer to Figure 14-14.When the market is in long-run equilibrium at point A in panel (b) ,the firm represented in panel (a) will

Correct AnswerverifiedShow Answer

Which of the following could be used to calculate the profit for a firm?

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Correct AnswerverifiedShow Answer

In calculating accounting profit,accountants typically don't include

Correct AnswerverifiedShow Answer

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day.If Winona's fixed costs unexpectedly increase and the market price remains constant,then the short run profit-maximizing level of output

Correct AnswerverifiedShow Answer

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Correct AnswerverifiedShow Answer

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands rises above the minimum of its average variable cost,but still lies below the minimum of average total cost,in the short run the firm will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedProfit can be calculated as (P...View AnswerShow Answer

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements,we would expect that

Correct AnswerverifiedShow Answer

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit.The firm's fixed cost is $4,000 and its variable cost is $8,300.In the short run,should the firm continue to operate?

Correct AnswerverifiedNo,the firm should shut down,s...View AnswerShow Answer

At the profit-maximizing level of output,

Correct AnswerverifiedShow Answer

The analysis of competitive firms sheds light on the decisions that lie behind the

Correct AnswerverifiedShow Answer

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6.Firms will shut down in the short run if the market price

Correct AnswerverifiedShow Answer

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

Correct AnswerverifiedShow Answer

When a profit-maximizing firm is earning profits,those profits can be identified by

Correct AnswerverifiedShow Answer

The exit of existing firms from a competitive market will

Correct AnswerverifiedShow Answer

Which of the following statements regarding a competitive market is not correct?

Correct AnswerverifiedShow Answer

Table 14-3 -Refer to Table 14-3.For a firm operating in a competitive market,the marginal revenue is

Correct AnswerverifiedShow Answer

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Profit can be calculated as (P...
View Answer

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No,the firm should shut down,s...
View Answer

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